Construction and Supply Risk: An Accident Waiting to Happen? (Part 2)

Will the construction industry become the next sector to face the public supply chain risk wrath in newspaper headlines? I love the comments by Achilles’ Stephen Marshall as quoted in a UK building/construct trades publication around supply chain risk in the construction industry: “We believe that at present, the construction sector could have its own version of the horse meat scandal … This is due to a ‘perfect storm’ of a lack of information about suppliers at Tier 2 and below, twinned with a seemingly misplaced confidence in the information they have about their supply chains.”

Construction is a unique industry on many levels. For procurement, the amount of information managed and relayed at all tiers of the supply chain around specific components of a program is often incomplete. A PO could be as broad as “build me a building.” Of course this is an extreme, but so much of the detail comes from the supplier-side of the accounting equation (invoices) given the time and materials nature of most projects.

Of course the up-front vetting of tier one suppliers and general or prime contractors, is often a rigorous process. But when you get into lower tier suppliers, vetting and visibility greatly diminishes. Whether it’s managing individual insurance certifications and compliance for contractors going onsite to bigger questions involving transference of liability and indemnification during a project, lower-tier supplier visibility and engagement is behind the times compared to other industries in the engineering and construction marketplace.

In the above-linked article, Achilles opines that the "construction industry should look to continuously improve by routinely investigating and checking exactly who is working on projects, so that risks can be established and mitigated or prevented.” And that’s just the building ante!